When you need quick funds, the two most common options are a personal loan and a credit card. Both have their own advantages and limitations. Choosing the right option can save you money and prevent financial stress. In this article, we compare personal loans vs credit cards in detail to help you decide which is better for your needs.
What Is a Personal Loan?
A personal loan is an unsecured loan where you receive a lump-sum amount and repay it in fixed monthly EMIs over a fixed tenure. Interest rates are usually fixed, making repayment predictable.
Personal loans are suitable for large expenses like medical emergencies, weddings, travel, or debt consolidation.
What Is a Credit Card?
A credit card allows you to borrow money up to a pre-approved limit and repay it later. If you repay the full amount within the interest-free period (usually 45–50 days), no interest is charged.
Credit cards are best for short-term and small expenses.
Personal Loan vs Credit Card: Key Differences
| Feature | Personal Loan | Credit Card |
|---|---|---|
| Interest Rate | 10.5% – 24% p.a. | 30% – 42% p.a. |
| Repayment | Fixed EMIs | Flexible (minimum due) |
| Loan Amount | High | Limited credit limit |
| Tenure | 1–5 years | No fixed tenure |
| Interest-Free Period | No | Yes (limited) |
Which Is Cheaper: Personal Loan or Credit Card?
For large amounts and long-term needs, a personal loan is cheaper due to lower interest rates. Credit cards become expensive if you revolve the balance and pay only the minimum due.
For small expenses repaid quickly, credit cards can be cost-effective.
When Should You Choose a Personal Loan?
Choose a personal loan if:
- You need a large amount
- You want predictable EMIs
- You want lower interest rates
- You are consolidating debt
When Should You Use a Credit Card?
Use a credit card if:
- You need funds for short-term expenses
- You can repay within the interest-free period
- You want rewards or cashback
Impact on CIBIL Score
Both personal loans and credit cards affect your credit score:
- Timely EMI or bill payments improve CIBIL score
- Missed payments negatively impact credit history
Maintaining discipline is key in both cases.
Relationship With Homepage Guide
If you are planning to borrow money, read our complete personal loan guide to understand eligibility, interest rates, EMI calculation, and safe borrowing tips.
FAQs – Personal Loan vs Credit Card
Is personal loan better than credit card?
For large and long-term borrowing, personal loans are usually better.
Which option has lower interest?
Personal loans generally have much lower interest rates than credit cards.
Does credit card usage affect loan eligibility?
High credit card usage can reduce personal loan eligibility.
Can I convert credit card dues into personal loan?
Yes, many banks allow balance transfer from credit card to personal loan.
Disclaimer
EarnPG.com does not provide loans or credit cards. The information is for educational purposes only. Final terms depend on the lender.
